Energy efficiency and the CDM in South Africa: constraints and opportunities

Abstract

Energy-efficiency projects were expected to consti-tute an important project type under the Clean Development Mechanism (CDM). In South Africa, there is significant potential for energy savings in several sectors. The savings possible in industry have been demonstrated through plant-level energy audits, measurement and verification of Eskom’s Demand Side Management (DSM) programme and national energy modelling. Enabling policy for energy efficiency and demand-side management has been adopted by government and the utility, Eskom. A dedicated National Energy Efficiency Agency (NEEA) was established in 2006. Yet, energy-efficiency still fails to realise its potential. The paper seeks to dispel the misconception that energy efficiency projects might not be ‘additional’ under the CDM. Analysis of barriers, which is well understood by those dealing with energy efficiency, can be used to demonstrate additionality. A stan-dard tool for demonstrating additionality is now available, as are baseline methodologies for both large and small-scale CDM projects. It should, therefore, be clear that energy efficiency projects are not a priori ruled out as non-additional. Each proj-ect has to demonstrate additionality, as for any other project type. Finances are available from various sources, and the CDM can offer further funding for initial costs, or in removing the barriers to energy-efficiency projects. Internationally, energy efficiency initially did not account for large numbers of CDM projects, nor a major share of carbon credits. With the recent growth in CDM projects, however, the numbers of energy-efficiency projects are increasing internation-ally. In South Africa, analysis of the emerging CDM portfolio shows that energy-efficiency projects are much better represented at the concept stage than in fully designed CDM projects. The major elements for implementing energy-efficiency projects exist – dedicated institutions, enabling policy frameworks, approved methodolo-gies and even an electricity crisis to raise awareness. Funding is available from various sources, and the CDM can offer further funding for initial costs or in removing the barriers to energy-efficiency projects. The CDM rules should soon allow for registration of entire programmes, which could include energy-efficiency standards or demand-side management. Innovative financing solutions such as clean energy lending can assist as well. All that seems to be needed is a concerted effort to realise the potential. Such efforts could be driven by the Designated National Authority or the National Energy Efficiency Agency. Together with initiatives from the private sector, a dedicated effort might help South Africa find a clear route for ener-gy-efficiency projects under the CDM in South Africa.